This paper proposes a conceptualization of business cycle fluctuations in which the role of financial conditions and nonlinear dynamics are explicitly incorporated. We emphasize that the sources of instability in an economy cannot be associated exclusively with the real or financial sectors, and we incorporate the idea that financial conditions are both important sources of instability and possible nonlinear propagators of other sources of instability. We test the propagation mechanisms of such conceptualization using a Bayesian Threshold Vector Autoregression model for the US economy.

A significant portion of the work published on firm investment adapts models that operate on an “average firm” assumption, which is different from the investment behavior of a modal firm. This study employs a Bayesian quantile regression model to explore the investment rates in the United States and finds, first, that the firms with higher investment rates have a higher responsiveness to the valuation ratio and lower responsiveness to the profit rate, and, second, that there is a decline in the responsiveness of firm investment to these factors in recent years. The paper also emphasizes the role of autonomous investments in determining firm-level investment rates, based on differing sectoral factors.

Several studies have examined specific characteristics of firms while attempting to explain highly skewed firm size distribution and the presence of extreme values. This study adapted the quantal response statistical equilibrium model of boundedly rational firms and used firms’ probabilistic decision-making to infer the equilibrium relative size distribution. The theoretical model complements conventional and entropy-based concentration measures. The study presents an adaptation for business firms in the United States while investigating firms’ expansion decisions, aspired sizes, and responsiveness to opportunities.

This paper develops a statistical equilibrium model of the firm facing opportunities of profit and growth. A joint equilibrium distribution of profit rate and growth rate is obtained where firms’ probabilistic decisions to compete and allocate their resources and these decisions’ impacts on market outcomes are studied. Using this model, the paper estimates the joint probability density of profit rate and growth rate using firm-level data for the US, between 1962-2022 and documents the time evolution of competitiveness and accumulation behavior.

Incentive structures that support desired outcomes are crucial for building an egalitarian system. However, existing theories explicitly accounting for the social interactions that shape these structures are scarce. Thus, this study examines three types of political economies in which individual decisions depend on the actions of others and their consequences. Using simulations and mean-field solutions, it analyzes labor supply, occupational choice, and production decisions within these systems to explore the role of price signals, redistributive schemes and social interactions in achieving desirable equilibrium outcomes.

While social class is often used to explain economic outcomes and trends, identifying individuals' precise location within the class structure remains challenging. This paper proposes a novel approach to class structure and using a panel survey to analyze class location in the United States. Drawing on the Marxian concept of class, this study analyzes class polarization, intrapersonal mobility, and inequalities both between and within classes. We find that polarization and mobility are linked to growth patterns, yet many inequalities persist, diverging from macroeconomic fluctuations

Markets are frequently conceptualized as information transmission systems; however, the limits of information transmission are rarely incorporated into market analysis. This study models the investment-savings market as an information channel to evaluate market capacity and the probability of error in communicating profit rate expectations. Employing an additive white Gaussian noise channel with feedback, the analysis derives the conditions under which a rational expectations equilibrium can be attained and examines the resulting dynamics in an investment-driven macroeconomic system. Additionally, it investigates scenarios in which further noise from nominal wage adjustments arises in the feedback channel, and derives the corresponding error probabilities faced by non-optimizing agents transmitting profit rate expectations.